Business Day

Toshiba’s feud with Western Digital grows

• Firms in legal fight over rights to memory chips

- Ian King San Francisco

Toshiba took another stab at its US joint venture partner Western Digital, saying it has no rights to new chip production that is vital to the future of the firms.

The latest escalation of the fight between the two centres on a new factory called Fab 6. Toshiba said it would build the plant without participat­ion from its US partner, thereby cutting off Western Digital from chips made at the factory.

Western Digital inherited its stake in the joint venture when it bought SanDisk.

“Toshiba is dismayed by Western Digital’s pattern of exaggerati­ng SanDisk’s rights under the relevant agreements,” the Tokyo-based company said in a statement.

“Despite claims to the contrary, Western Digital does not now possess any legal ‘rights’ to participat­e in this phase of investment, which is an important investment in the next generation of flash memory.”

Western Digital countered with a statement, saying Toshiba’s position was wrong.

“The terms of the agreements and our related legal rights are clear, and we remain confident that we will receive our share of any capacity from Fab 6,” the San Jose-based company said.

“We are continuing our constructi­ve dialogue with Toshiba on this and other matters.”

The two companies are locked in a legal fight over Toshiba’s plan to sell its share of the joint venture to make up for multibilli­on-dollar losses in its nuclear power operations. Western Digital argues it has a say in the sale, as well as right of first refusal.

Further legal wrangling could delay the sale to a group of preferred bidders, putting Toshiba at risk of being delisted.

Aspects of the dispute have spilled over into court. Western Digital said a judge in San Francisco had agreed on Friday to change a temporary restrainin­g order — prohibitin­g Toshiba from blocking access by Western Digital employees to shared databases and other jointventu­re facilities — into a preliminar­y injunction.

The order also requires Toshiba to continue to supply materials and sample wafers to Western Digital in the US.

Western Digital needs to retain access to output from new Toshiba factories as improvemen­ts in manufactur­ing technology are one of the key determinan­ts of success in the memory chip industry. Newer plants and equipment

TOSHIBA IS DISMAYED BY WESTERN DIGITAL’S PATTERN OF EXAGGERATI­NG SANDISK’S RIGHTS UNDER AGREEMENTS

typically produce better semiconduc­tors more cheaply.

Toshiba said the talks haven’t proved fruitful. “Toshiba provided an investment proposal to SanDisk earlier this year,” the company said. “Despite numerous meetings and negotiatio­ns, including at the CEO-to-CEO level, Toshiba’s proposal was not accepted on the timetable set out in the agreements.”

Western Digital shares dropped 4% on Friday to close at $81.17 in New York. The stock has gained 19% in 2017. After Samsung, Toshiba is the secondlarg­est producer of flash memory chips used to store data in mobile devices.

 ?? /Reuters ?? Chip split: The SanDisk-branded Western Digital iNAND 7350 mobile storage flash drive, built on 3D NAND, is displayed at the SanDisk stand at the Mobile World Congress in Barcelona.
/Reuters Chip split: The SanDisk-branded Western Digital iNAND 7350 mobile storage flash drive, built on 3D NAND, is displayed at the SanDisk stand at the Mobile World Congress in Barcelona.

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